OSC lays out $1.4m in penalties for incompetence

by WP01 Oct 2013

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OSC lays out $1.4m in penalties for incompetence

The Ontario Securities Commission has issued penalties totaling more than $1.4 million to Factorcorp Financial director Mark Twerdun over his sale of debentures that resulted in losses of $25.6 million for Ontario investors.

Although there was no finding that the investment scheme was anything but legitimate at the outset, “it became almost immediately evident that the conduct of the respondents demonstrated a shocking level of negligence and incompetence,” Judge Christopher Portner said in his decision.

Twerdun is to pay a $750,000 administrative penalty, disgorge $420,000 to the commission for non-compliance and pay $251,145.37 for the costs of investigation.

A February hearing found that Twerdun sold debentures to 700 Ontario investors from 2004 to 2007, while wrongly claiming the money would be used to provide short-term financing to low-risk commercial clients. Instead, the OSC said many loans were not short-term, and they were unsecured or had unenforceable security, which meant the loans were far riskier than investors realized.

The hearing found that Factorcorp made materially misleading or untrue statements in the offering materials and in promotional materials. It also found that the firm and sole director Twerdun had breached a temporary order by redeeming certain FFI securities, and that Twerdun failed to ensure that investors were entitled to rely on the accredited investor exemption.

The OSC filing says Ontario investors lost approximately $25.6 million as a result of the respondents’ contraventions of Ontario’s securities law.

However, as the losses were due to negligence and incompetence rather than fraud, the judge said that while the respondents must cease trading securities for a period of 10 years, Twerdun will be permitted to trade securities through a registrant solely for the account of his RRSP.